Despite somewhat unfavorable supply and demand situation, home prices held their own in November. As measured by the median price per square foot, resale single family home prices were unchanged for the month while resale condo prices leapt by 7.4 percent. The condo increase brought the aggregate of the two price series up by 1.8 percent from October. The median condo price per square foot is quite a bit more volatile, and thus less meaningful, than the single family price, but nonetheless I’d consider November a positive month for home prices on the whole.
Here’s a look at the more accurate but less timely Case-Shiller index, which is only current through September. That index peaked in July and had dropped by 1.6 percent over the following two months.
Based on the median price data, I am projecting a further drop of about 1 percent for the Case-Shiller index in October, and then a flattening in November. (These projections are not pictured in the chart above).
Closed sales declined for the month, but this is typical for November.
Pending sales, which foreshadow future closed sales, also dropped, but to a more mild degree.
Inventory continued the mild decline that began in October.
The number of months’ worth of inventory, which compares supply to demand, stayed steady at just over 6 months. Periods in which inventory has been greater than six months have tended to coincide with stagnant or declining prices.
Interest rates may become more of an issue in the near future. The average 30-year fixed mortgage rate has leapt from 4.17 percent to 4.61 percent in just one month. 4.61 percent is still extremely low on an absolute basis, but that’s a big relative change. While the prospect of rising rates could push some buyers off the fence at the outset, a protracted period of higher rates would tend to reduce buyer demand, all other things being equal. This will be an area to keep an eye on. (I believe that interest rates are likely go far higher in the years ahead, but there is no indication that this is going to happen any time soon).
Rising mortgage rates won’t help, aside from the potential for a transitory scared-off-the-fence effect. But the main driver for now continues to be the level of inventory compared to demand, which suggests an ongoing stagnation in prices.
Please contact Rich Toscano at rtoscano@pcasd.com and follow him on Twitter at http://twitter.com/richtoscano.